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Issue 1-2016 14 January 2016
Squeeze on car dealers fuels decrease in prices M argins in the automotive industry have become tighter making business even more competitive, according to KPMG. The company says the effects of this are being felt across the market – from sales of new and used cars, to finance, insurance and leasing – with the main winner being the consumer. Its latest non-bank financial institutions performance survey reports that motor-vehicle traders and lenders are operating under increasing pressures. John Kensington, KPMG’s
head of financial services, says its survey of 23 companies highlights dealers’ overall margins as being eroded by high sales targets set by manufacturers and “the need to cut margins to get the last few sales away”. They also report marques are placing “very high expectations on brand retailers” and “setting high targets before any rebates can be achieved”. Kensington says the flow-on effects include dealerships being forced to pre-register units, and build inventory funded by banks and non-bank lenders.
But, at the same time, dealers’ profits have become “depressed when target vehicles must be sold”. “Dealers are starting to see low margins become even lower,” says Kensington. “This increased need to sell vehicles to get rebates is also driving down the price of second-hand vehicles. “As a result, finance income, insurance, warranties and servicing play increasing roles in their overall margins. “Anecdotally, we’ve also heard that although the number of vehicles registered has increased, a large proportion
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Rise in fair-trading complaints
C
omplaints lodged with the Commerce Commission have jumped since reforms to laws have been introduced with the motor-vehicle industry in the top three for most criticised about the Fair Trading Act (FTA). It received 4,377 representations about the act concerning 1,860 businesses with 25 per cent relating to 24 traders, according to its
Consumer Issues 2015 report. Online trading generated 33 per cent of all complaints lodged despite accounting for only a small percentage of sales with its total twice those generated by buyers visiting business outlets. The three industries attracting the most complaints were telecommunication service providers, and suppliers of domestic appliances,
electronics and phones – both on 10 per cent – followed by car dealers with six per cent. Legislative changes that came into effect in June 2014 included online businesses having to declare they are “in trade” to ensure buyers are aware of their rights under the Consumer Guarantees Act (CGA) and FTA. Retailers have to now compare
Sport mode boosts response
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